Telcos dial Africa for new pastures

After tasting success in domestic markets, it’s ‘Dial Africa’ for Indian telecommunication companies. And it’s not the high-profile, twice-rejected MTN alone that’s attracting Indian firms.

While the government-owned Mahanagar Telephone Nigam Ltd (MTNL) is in advanced discussions for telecom licences in four countries, Bharat Sanchar Nigam Ltd (BSNL) is formulating its strategy to enter the continent.

Adding their bit are the Essar group, Tata Communications and Reliance Communications, all of which have licences for telecom services in African countries and are looking to expand their operations.

Bharti Airtel is negotiating with South Africa-based MTN for a “two way deal” that would allow it to own 49 per cent equity in South African giant MTN.

“We are evaluating a proposal to acquire a company that has licences in four to five countries,” said R.S.P. Sinha, chairman and managing director (CMD), MTNL. “Africa is a lucrative market and we would like to acquire a licence through auction if there is an opportunity.” However, in most countries, licences have been auctioned.

“Funding is not an issue for our Africa expansions,” Sinha said. “We have done all the ground work.” MTNL is presently a service provider in partnership with Tata Communications (formerly VSNL) and Telecommunications Consultants India Ltd (TCIL). “We will enter into Africa on our own,” said Sinha.

MTNL not the only government-owned company eyeing the African market. “We are looking at an expansion in Africa,” said Kuldeep Goyal, CMD, BSNL. “Whenever we find right opportunity we will grab it.”

Essar group has acquired a telecom licence in Uganda. “Africa is an important market for Essar’s telecom business and we are working towards building a strong brand in this market,” said Srinivas iyengar, CEO, Essar Telecom Kenya. “We would be looking at opportunities to establish a pan Africa footprint in future.”

The company plans to offer services in a joint venture with a local company, Kenya Telecom Uganda Ltd. It already has a licence in Kenya and plans to expand in other countries.

“We find African markets promising and have recently hiked our stake in Neotel (of South Africa) to 56 per cent from 26 per cent,” a senior Tata Communications official said. “We view this as a beach head to the rest of the African markets as and when right opportunities arise.”

Why Africa?

“African countries have just started moving on the development path,” said RK Upadhyay, CMD, TCIL. The company has been executing telecom infrastructure projects in Africa for past 20 years and is present in 30 countries. “There is expected to be enormous growth in telecommunications in next five years. Whenever, development takes place in a developing economy, the need for telecom services increases,” Upadhyay said.

“Africa has a low teledensity and high average revenue per user,” said Goyal. This explains why Indian providers want to go to. India has a teledensity (number of telephones for a population of 100) of about 40 per cent. In many African countries the teledensity is below 20 per cent (See table).

Besides, the continent’s average revenue per user is high. Against Rs 250 per month in India, the number in some African countries including is about three times as much.

Reliance has a licence in Uganda for offering mobile, fixed line, Internet, national and international long distance services, in addition to WiMax and Wifi services. It plans to acquire licences in other countries, a senior official said.